| #ffffff;" /> | | | | demand, supply and competition, less on costs. |
| There are three main functional areas of | | | | For i.e. high demanded plus lack of competition |
| accounting which need to be considered in modern | | | | would result in the business charging higher prices |
| day accountancy for any business. The three | | | | for its product, well above the costs. |
| areas are, cost, finance and management | | | | The third area is management accounting, which is |
| accounting. | | | | related closely to cost accounting. Although it has |
| The first area, financial accounting, is used mainly | | | | essentially evolved from cost accounting, |
| for ascertaining the results of any such business | | | | management accounting plays a much broader |
| on a periodic basis, for i.e. 6 months. This should | | | | role in management decisions. It measures the |
| as a result; help the company determine the | | | | performance, economically, of the whole business, |
| future course of action, in the long term. From an | | | | vis-à-vis the economic environment that |
| economic perspective, financial accounting treats | | | | the business operates in. This area of accounting, |
| money as a factor of production. | | | | seeks to combine both financial and cost |
| Management and cost accounting are apparatus | | | | information into a much broader function. |
| used to help management make decisions on a | | | | Lastly, management accounting, this area is |
| day to day basis. Management and cost | | | | instrumental in advising and assisting management |
| accounting aren’t useful simply for their | | | | in making vitally important business decisions. It |
| own sake. These two functions help management | | | | essentially makes management more self aware |
| conduct themselves along with other vital factors | | | | of the economic implications and consequences of |
| involved in the running of a business. Other key | | | | decisions made. From an economic perspective, it |
| factors could be supply, demand, competitors, | | | | looks at the study of money as an economic |
| availability of raw materials, logistics etc. | | | | resource, while at the same time, treating it as a |
| The second area is cost accounting, its primary | | | | measure of economic performance. This allows |
| purpose is to attain the value of direct and | | | | the management to measure it as an economic |
| indirect costs involved in production. From the | | | | factor of production, for i.e. the rate of return on |
| value acquired, management can make an | | | | capital employment. You can find more |
| informed decision on improvement in production | | | | information and resource links on accounting by |
| performance. From an economic perspective, cost | | | | visiting: |
| accounting is the measurement of economic | | | | It is then seen that accounting plays a vital role in |
| performance. Thus, this information gives | | | | three distinct areas, which are equally as |
| management a clearer indication of the | | | | important. With the advent of computerised |
| performance of the product resources in the | | | | accounting, it has made it much easy for |
| business. | | | | management to monitor the accounting |
| Costing also helps the sales manage in setting the | | | | information. Financial accounting software, allows |
| correct price. But, because costing is solely a | | | | you to make financial statements and various |
| measurement of economic performance, it can | | | | cost and MIS statements almost instantly with |
| not be considered as an accurate basis for setting | | | | just one push of a button, the only laborious |
| prices. This is because selling prices is more of an | | | | aspect of accounting is data entry. A financial |
| economic decision. It would not be wrong for me | | | | manager must bring it upon himself or herself to |
| to mention that pricing is basically determined by | | | | make sure that meaningful data is input into the |
| market factors. Prices are influenced mainly by | | | | system. |